A black franchisee is claiming that McDonald’s racially discriminated against him by classifying him as a low-volume restaurant worker in black neighborhoods and forcing him to downsize his store years later, after unfairly classifying his locations.
Herbert Washington, a former Major League Baseball player and the chain’s largest black franchisee in the United States, operates 14 McDonald’s restaurants, up from 23 in 2017. He filed a lawsuit against the fast-food giant in Ohio’s federal court on Tuesday. -market. He follows two racial discrimination lawsuits with similar allegations by current blacks and former McDonald’s franchisees last year.
“When I stood up for myself and other black franchisees, McDonald’s started dismantling my life’s work, forcing me to sell one store after another to white traders,” Washington said in a statement.
McDonald’s USA said it is still reviewing the complaint, but offered a statement to CNBC stating that Washington faces business challenges and that the company offered it multiple opportunities to resolve those problems. The company also said it has invested “significantly” in its organization.
“This situation is the result of years of mismanagement by Mr. Washington, whose organization has failed to meet many of our standards for people, operations, guest satisfaction and reinvestment,” the company said in a statement. “Its restaurants have a public record of these issues, including past health and sanitation issues and some of the highest volumes of customer complaints in the country.”
A separate complaint filed by 52 black operators in September claimed that their locations generated about $ 700,000 less than the national average for their franchisees between 2011 and 2016. Washington’s complaint states that McDonald’s told black franchisees in 2018 that it would close this cash flow gap between black and white operators. According to the lawsuit, the plan to correct the problem involved giving White franchisees more of the low-volume locations that were operated by Black franchisees.
Washington started as a McDonald’s franchisee in 1980. Despite living in Michigan most of his life and having no ties to Rochester, New York, the company reportedly pressured him to buy a restaurant in a predominantly black neighborhood, without giving him any other options. to a store location.
After about two decades as a franchisee in Rochester, Washington operated five restaurants. According to the complaint, White’s franchisees in the area were allowed to expand much more quickly than Washington, which was only allowed to buy locations in low-volume neighborhoods.
In one example, Washington struck a deal in the early 1990s to buy restaurants located in the Rochester suburbs of a White operator. McDonald’s reportedly blocked the sale and instead sold the locations to a white owner.
In 1998, Washington sold its restaurants in New York to buy 25 locations from a White operator with offices in Ohio and Pennsylvania. The acquisitions made him the largest black franchisee in the US
Over the next decade, Washington continued to buy more locations in Cleveland. Typically, restaurants were older and in predominantly black neighborhoods with lower sales volumes.
For example, Washington added three restaurants on Cleveland’s East Side to its store base after the vice president of the field office allegedly asked him to intervene because previous owners had problems. When he took over, McDonald’s immediately increased rents, according to the lawsuit. When Washington protested, the company allegedly told him that he could perform at low volumes better than anyone else.
However, according to the complaint, McDonald’s would not approve Washington to operate locations on the West Side or in the suburbs of Cleveland, which tend to have more white residents. Washington claims that over the years it has complained to the company about the matter.
In 2011, he was awarded a location in the University Heights neighborhood. The restaurant would be close to a shopping center that included a Whole Foods, and the community was about 70% white, according to census data cited in the complaint.
The deal was closed and Washington selected the equipment and decoration of the place. But then McDonald’s allegedly intervened and awarded the restaurant to a White franchisee. According to the complaint, Washington complained to McDonald’s chief operating officer and told him that franchisee White was racist, and the executive replied “I know.”
In 2015, Steve Easterbrook became the company’s chief executive, replacing its first black CEO, Don Thompson. Under Easterbrook and now CEO Chris Kempczinski, who first served as head of the United States division, McDonald’s advertising has stopped trying to reach black consumers, according to Washington’s complaint.
Franchise agreements prevented Washington from reaching these customers on its own because it was banned from using advertisements or promotional material that was not approved by McDonald’s.
“In other words, he had no recourse to the company’s decision to stop advertising to a large part of its customer base and the resulting impact on its sales,” said the complaint.
In 2017, McDonald’s told Washington that it was no longer eligible to continue expanding its store base, which it hoped to do to offset the store renovation costs required by the franchisor. According to the complaint, nothing had changed in the operation of its restaurants, which were still profitable.
Washington claims that McDonald’s subjected its locations to “targeted and irrational inspections and severe classification” as a pretext to force it to sell. To expand again, Washington had to sell some of its locations within a set timeframe.
The company initially proposed that he buy four of his own locations in a neighborhood that was 90% white. High-volume restaurants would help Washington pay for the expensive store renovations that US restaurants were undergoing, such as adding digital menus and self-service kiosks. Washington agreed to the plan, but McDonald’s rejected the acquisition.
In the meantime, McDonald’s continued to insist that Washington sell some of its restaurants within a set timeframe before they let it expand again. All the approved buyers that McDonald’s introduced to Washington for these restaurants were white. The company also pressured him to accompany store renovations, including in the locations it was requiring him to sell.
“McDonald’s was demanding that Mr. Washington subsidize his own death by dumping resources on these properties as they were snatched from his hands,” the complaint alleges.
While Washington struggled to find interested buyers who paid a fair price for low-volume venues, McDonald’s told him to pack these restaurants with its high-volume restaurants to make them more attractive, rather than just offering the venues.
Franchisee White who bought three of the Cleveland restaurants in Washington received $ 3 million in incentives from McDonald’s to buy the locations. Washington never received incentives or financial support when it bought or managed these restaurants.